What is a B Corp?
IMPACT 101: Thousands of firms – including Patagonia, Triodos, Nespresso and The Guardian – now boast a ‘B’ symbol. But what exactly is a B Corp? How does certification work – and what criticisms does it face? Our expert contributor Adam Garfunkel has the answers.
What is a B Corp?
Adam Garfunkel: B Corps are companies that have been verified as meeting high standards of social and environmental performance. They are certified by B Lab, which is the global not-for-profit behind the B Corp label, founded in 2006. They make a legal commitment (by changing their articles of association) to pursue a purpose beyond making money and to consider all stakeholders, not just shareholders. In short, this ‘mission lock’ changes directors’ duties, and should result in directors making more nuanced decisions than solely prioritising profits.
How is a B Corp different to a social enterprise?
Adam Garfunkel: B Corps are free to distribute their profits however they wish – there is no requirement to have an ‘asset lock’ as there is with social enterprises, where a percentage of profits are always returned to a charitable cause. (Definitions vary: the Social Enterprise World Forum says a social enterprise reinvests the majority of any surplus towards its purpose, while some others talk of reinvesting or donating at least 50% of profits or surpluses.) So B Corps have a mission lock, but no asset lock.
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What’s the difference between a B Corp and a benefit corporation?
Adam Garfunkel: B Corp is a certification that many kinds of companies can pursue; a benefit corporation is a specific legal form that goes further than B Corp status.
While developing the B Corp certification, the founders of B Lab also worked to usher in a piece of legislation that resulted in benefit corporations – a new kind of legal structure for businesses. Benefit corporations have particular obligations when it comes to purpose, accountability and transparency. The principle being that – especially in the USA, but potentially anywhere – B Corp status alone might not stop shareholders from arguing that the principle of ‘considering all stakeholders’ is reducing their financial returns, and they could thus seek to appoint directors who will maximise profits. Changing a company’s legal form to a benefit corporation provides safe harbour for directors from these activist shareholders. Companies can now become benefit corporations in most US states, British Columbia in Canada (known as a ‘benefit company’) and Italy (‘società benefit’).
B Corps are free to distribute their profits however they wish
What kind of companies can become B Corps?
Adam Garfunkel: Companies of any size, industry or incorporation, including listed companies, can become certified as a B Corp, but their path there might vary. At a minimum, they must be for-profit companies that have been in operation for more than 12 months. (Startups can commit to certifying within a year, i.e., when they have a full set of accounts.) B Lab also has a stance on controversial industries, which might affect a company's eligibility. Companies wishing to certify need to be from regions where B Lab or a partner is present.
The B Corp movement was pioneered by purpose-driven small or medium-sized enterprises (SMEs). While still mainly populated by SMEs, there are more and more ‘mainstream’ businesses that are B Corps. Subsidiaries of large corporations can join independently of their parent company, as long as they are sufficiently in control of the business. And multinational corporations can also join. For example, Danone is in the process of certifying its subsidiaries around the world.
- Read more in our Impact 101 series: What is steward ownership?
How widespread are B Corps now?
Adam Garfunkel: The B Corp movement started from the United States but today, it is a truly global certification. Currently, there are over 9,000 B Corps in 102 countries, representing 162 industries and include more than 850,000 employees. About half the world’s B Corps are located in the United States, Canada and the United Kingdom. The UK is the fastest growing B Corp community in the world, with about 2,000 joining the movement here in the past three years.
There are over 9,000 B Corps in 102 countries
How does the certification process work?
Adam Garfunkel: B Lab is the entity behind the certification process. In order to become a certified B Corp, eligible companies must complete a holistic 200-question assessment, which includes five impact areas: governance, workers, community, customers and environment. The company then submits their assessment to B Lab for verification and pays relevant fees throughout the certification process. A sample of their answers are then checked by B Lab analysts and if the final score is above a threshold of 80 points, the company can certify. Company representatives must also sign a ‘Declaration of Interdependence’ which speaks to the beliefs and values of the movement; agree to have some details of their score published; and pay annual certification fees.
To remain a B Corp, companies must recertify every three years. Depending on the size and the complexity of the company, B Lab might assign several analysts to assess the company. For first-timers, companies should allow at least a few months to get ready to submit, and a few more to go through certification. The whole process generally takes at least a year.
A new version of the requirements will be rolled out during 2025, with the first companies certifying against it in 2026. This version is quite different from previous ones in including minimum requirements across eight impact areas, rather than the current approach where companies can choose which questions they answer positively to pass the 80-point threshold.
Why do companies choose to certify as B Corps? What are the main advantages?
Adam Garfunkel: As a certification, a principal advantage is third-party validation of a company’s social and environmental performance. Along the way, companies that are really keen to be more impactful can learn how to improve from the many ideas embedded in the questionnaire. And the B Corp world is a vibrant community of like-minded people, which is welcoming and supportive.
The recognition that increasingly comes with being a certified B Corporation can have commercial benefits: the ability to attract and retain great talent, and in some cases, a competitive advantage in gaining new clients and customers.
Some companies see achieving certification as the pinnacle, rather than the beginning of the journey to more positive impact
What are some of the limitations or criticisms of B Corp certification?
Adam Garfunkel: It is easy to see certification as the goal in itself. Becoming certified is hard and successfully certifying is something to celebrate. But some companies see achieving certification as the pinnacle, rather than the beginning of the journey to more positive impact. This is despite B Lab and many others in the movement repeatedly stating the importance of continuous improvement.
The strong sense of community and shared goals is very compelling but some business leaders find this overdone, and to those outside the community it can come across as an exclusive club.
The B Corp movement is also a broad church by design. At one end are purpose-driven companies that exist to address a social or environmental issue, and are not focused solely on maximising financial returns. At the other are companies that do consider the impacts of their operations on people and planet, but are very much ‘profit-first’ businesses. For example, both Cafédirect and Nespresso are B Corp coffee companies. One has consistently striven to change where profits from coffee production flow and is owned by coffee farmers; the other is owned by Nescafé, a company that has for 30 years returned increasing dividends to its shareholders. With the same B Corp logo on their products, consumers might think there is no difference between the two companies.
What are some alternatives to pursuing B Corp certification?
Adam Garfunkel: For those companies that are committed to being purpose-driven and want to promote a purpose economy, they could consider a verification called People and Planet First, developed by the Social Enterprise World Forum. There are also ISO standards around social responsibility (ISO 26000) and governance (ISO 37000), and a BSI standard for purpose-driven organisations (PAS 808), which will form the basis of an ISO standard, due to be developed by the end of 2026.
- Adam Garfunkel is partner and chief impact officer of Junxion Strategy, a certified B Corp social impact consulting firm. He has been trained by B Lab as a ‘B Leader’ and has helped numerous companies to certify as B Corps. He is also a B Corp Ambassador and sits on B Lab’s regional standards advisory group for the UK.
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